Using ten years of FX transactions data we demonstrate that a large share of the FX forward discount bias can be accounted for by order flow. A simple microstructure-based decomposition suggests that order flow creates a timevarying risk premium that is correlated with the forward discount. The...

This paper empirically evaluates the predictive performance of the International Monetary Fund's (IMF) exchange rate assessments with respect to future exchange rate movements. The assessments of real trade-weighted exchange rates were conducted from 2006 to 2011, and were based on three...

This paper investigates whether commodity convenience yields - the yields that accrue to the holders of physical commodities - can predict the exchange rate of commodity-exporters' currencies. Predictability is a consequence of the fact that i) convenience yields are useful predictors for...

In this paper, we study the effectiveness of carry trade strategies during and after the financial crisis using a flexible approach to modeling currency returns. We decompose the currency returns into multiplicative sign and absolute return components, which exhibit much greater predictability...

This working paper empirically and theoretically analyzes the exchange rate's role in Mexico's development for the period 2004-19. We test the hypothesis of the re(emergence) of the balance sheet effect due to an increase in external debt in the nonfinancial corporate sector; higher foreign debt...

Liabilities denominated in foreign currency have established a permanent role on emerging market firms' balance sheets, which implies that changes in both global liquidity conditions and in the value of the currency may have a long-lasting effect for them. In order to consider the financial...

We develop an ecological open-economy SFC model that enables testing cross-area interactions among productive sectors, financial markets and the ecosystem. We show that the unequal technical progress across areas, coupled with rising ecological awareness, can force governments of less...

With the global rise in authoritarianism, there has been an increase in political commentaries by the populist leaders that have criticized their central banks in favor of lower interest rates. We analyze the effects of these political pressures on exchange rates. We provide strong empirical...

We shed new light on the negative relationship between real stock returns or real interest rates and (i) ex post inflation, (ii) expected inflation, (iii) unexpected inflation and (iv) changes in expected inflation. Using the structural vector autoregression methodology, we propose a...

Turkish economic growth depends on capital inflows and access to cheap credit sources. Once the global financial conditions tightened in 2018, Turkey was among the emerging markets that suffered the most. This article analyses the making of Turkey's economic crisis in 2018-2019, while...